Debit cards let kids learn as they spend
By PATT JOHNSON
Des Moines (Iowa) Register
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Jake Jacobs' easy access to cash dried up this summer.
His mother said she thought he was spending too much, so she confiscated the 17-year-old high-school senior's debit card — Jake's lifeline to shopping, eating out and gasoline for his car.
"It's not really a big deal," he said. Now he has to go to his mom for spending money. "Maybe this way I'll cut back on spending."
For some teens, debit cards are as essential as car keys, part status symbol and part convenience. If you're old enough to open a checking account — or get your parents to co-sign on one — you're eligible for a debit card.
Parents and financial experts agree that debit cards can act as financial training wheels for teens before they get a credit card. But parents should track how teens use the cards, the experts advise.
"It's not like real money because I never see the cash," said 16-year-old Kara Moore of West Des Moines, Iowa, who said she buys clothes with her card.
Her friend Natalie Loots, 16, of Clive, Iowa, sees it differently. "I am afraid if I had a card, I would spend more money," she said.
Debit cards should be viewed as an opportunity to do some financial training, said Tom Coates, executive director of Consumer Credit of Des Moines, a nonprofit credit counseling organization.
"Debit cards are part of our day-to-day lives right now," he said.
The Foundation for Credit Education says that the benefits of debit cards for teens include:
Jim Knoblauch of Urbandale, Iowa, thought it was a good idea when his son Sam, 17, proposed getting a card last year. He guided his son through the process of recording purchases and balancing the account each month.
"(Sam) has never been overdrawn," he said.
When his three older daughters went off to college, they had not had checking accounts or debit cards. The lack of experience contributed to some major bumps in their financial paths, he said. "I didn't want another kid going through that," he said.
Teenagers will spend about $158 billion this year, according to Teen Research Unlimited, a Chicago-based company. Research also shows that about 3 percent of youths between ages 12 and 15 had debit cards; 18 percent of 16- and 17-year-olds had cards; and 50 percent of 18- and 19-year-olds used debit cards.
Research from Nellie Mae, a federal student-loan provider, showed the typical college student has an average credit card balance of $2,169. And 56 percent of the undergraduates surveyed reported getting their first credit card at 18.
"If a student gets a credit card, make sure it has a low limit and that the limit cannot be increased," said Susan McDonnell of the Iowa State University Extension Service. "The trick is to teach kids how to save, spend and share their money."
DEBIT CARD TIPS
A debit card works like a check except the money is immediately deducted from a checking account. It can also be used at ATMs to withdraw cash. It's important to remember to:
Carry your debit card in the same place so that if it is missing, you will notice it immediately.
Keep all your receipts and record them in your check register in a timely manner.
Check bank statements and report any unauthorized transaction immediately.
Buy only from recognizable businesses when shopping on the Internet. Make sure the transaction is on a secured Web site.
